Chapter 1: Q 9 (page 15)
Under what circumstances might people appear to use rules of thumb, as suggested by the assumption of bounded rationality, even though they really were behaving in a manner suggested by the rationality assumption?
Under the situations of change in the environment.
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Could it be the case that chicken farmers who have both humanitarian and profit motives for keeping their chickens comfortable nonetheless are fully "self-interested"? Explain.
How might Figure support the argument that higher incomes associated with greater levels of educational attainment provide an incentive for women to have more children?
For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:
(a) An economic study of the number of online searches that individuals conduct before selecting a particular item to purchase online presumes that people are interested only in their own satisfaction, pursue their ultimate objectives, and consider every relevant option.
(b) An economist seeking to predict the effect that an increase in a state's sales tax rate will have on consumers' purchases of goods and services resumes that people are limited in their ability to process information about how the sales-tax-rate increase will influence the after-tax prices those consumers will pay.
(c) To evaluate the impact of an increase in the range of choices that an individual confronts when deciding among devices for accessing the Internet, an economic researcher makes the assumption that the individual is unable to take into account every new Internet-access option available to her.
What would be the appropriate change in the U.S. degree of plastic-waste cleanliness if the marginal cost of pollution abatement is higher than the associated marginal benefit?
Why does the assumption of bounded rationality suggest that people might use rules of thumb to guide their decision-making instead of considering every possible choice available to them?
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